Tag: China

  • Critical Minerals and the CHIPS Act: How the US Is Trying to Build a Domestic Supply Chain

    The CHIPS and Science Act was signed into law in August 2022 to rebuild American semiconductor manufacturing. By 2025, the Trump administration had redirected at least $2 billion of its funding toward something the original legislation barely mentioned: critical minerals. The pivot tells you everything you need to know about where the actual bottleneck sits. You can build a semiconductor fab in Arizona — and the U.S. is building several — but if the neodymium magnets in the fab’s equipment, the gallium in the compound semiconductors, the germanium in the fiber optics, the cobalt in the tooling alloys, and the rare earth elements in the electric motors all come from China, then you’ve built a factory that runs on your adversary’s supply chain. The CHIPS Act started as a semiconductor bill. It’s becoming a critical minerals bill because the people implementing it realized the two problems are the same problem.

    The scale of the dependency

    China controls approximately 90 percent of global rare earth processing, 80 percent of gallium production, 98 percent of gallium metal output, 60 percent of germanium, and dominant shares of graphite, manganese, and cobalt refining. The United States has exactly one operational rare earth mine — MP Materials’ Mountain Pass facility in California — and until recently had zero domestic capacity to separate rare earth oxides into individual elements, zero capacity to produce rare earth metals from those oxides, and zero capacity to manufacture the neodymium-iron-boron permanent magnets that go into everything from F-35 fighter jets to MRI machines to wind turbine generators to EV motors. The U.S. mined the ore and shipped it to China for processing. That’s like growing wheat and sending it abroad to be turned into bread.

    When China imposed export controls on gallium and germanium in July 2023, exports dropped 97 percent in three months. European prices doubled. The demonstration was unambiguous: China could turn the valve on materials that the defense industrial base requires and the U.S. has no domestic alternative for. The semiconductor supply chain runs through a handful of chokepoints. The critical minerals supply chain runs through fewer. And unlike chips, where TSMC’s advantage is technological, China’s advantage in minerals processing is infrastructural — built over three decades of sustained investment that the U.S. chose not to match.

    What the government is actually doing

    The response since 2025 has been the most aggressive federal intervention in mining and materials processing since the Strategic Petroleum Reserve was established. The Department of Defense’s Office of Strategic Capital deployed over $4.5 billion in capital commitments by January 2026, closing six major critical mineral deals in a single year. The scale and structure of individual deals illustrate how far the government is willing to go.

    MP Materials — the Mountain Pass operator and sole U.S. rare earth miner — received a $400 million equity investment from the Pentagon plus a $150 million loan to build heavy rare earth separation capacity in California. The Pentagon also established a price floor of $110 per kilogram for neodymium-praseodymium oxide — effectively guaranteeing MP Materials a minimum revenue regardless of market fluctuations. That’s the government acting as both investor and customer, de-risking a market that private capital alone won’t enter because Chinese producers can dump prices below any Western competitor’s cost of production.

    Vulcan Elements and ReElement Technologies secured a $1.4 billion public-private partnership — $620 million in Pentagon loans, $50 million from the Department of Commerce under the CHIPS Act (with the government receiving an equivalent equity stake), and $550 million in private capital — to manufacture up to 10,000 metric tons of NdFeB magnet material domestically. USA Rare Earth announced a $1.6 billion debt and equity package with the government taking a 10 percent ownership stake. In Alaska, the Pentagon invested $35.6 million for a 10 percent stake in Trilogy Metals’ Upper Kobuk project. In Louisiana, Ucore Rare Metals received $18.4 million from the Army for a commercial-scale rare earth separation facility.

    The National Defense Stockpile, a strategic reserve created in 1939 and largely neglected for decades, received $2 billion in new funding through the One Big Beautiful Act. The Pentagon announced intent to procure up to $1 billion in stockpile materials, issuing requests for information on scandium, tungsten, graphite, samarium, dysprosium, and terbium — minerals for which the U.S. has known deposits but essentially zero commercial production capacity.

    The permitting acceleration is the other half. A March 2025 executive order expanded Defense Production Act authorities, reduced approval requirements, and directed streamlined permitting for mineral projects. The Department of the Interior published a new Critical Minerals List in November 2025, expanded from 50 to include additional materials based on updated methodology. In January 2026, Section 232 tariff actions targeted processed critical minerals alongside semiconductors — not yet imposing duties on minerals, but establishing monitoring frameworks and requiring Commerce to report on whether future restrictions are warranted.

    Why it might not work fast enough

    The money is real. The policy intent is clear. The problem is time. The average timeline from mineral discovery to production in the United States is 17 to 29 years. Environmental review, permitting, judicial challenge, construction, commissioning, and ramp-up each take years. China didn’t build its mineral processing dominance through a single piece of legislation. It built it through three decades of sustained investment, deliberately subsidized production, environmental shortcuts that no Western democracy would permit, and strategic acquisition of mining assets worldwide — an estimated $57 billion invested in copper, cobalt, nickel, lithium, and rare earth mines and processing facilities from 2000 to 2021.

    The CHIPS Act-funded investments will take years to produce operational output. Vulcan Elements’ 10,000-ton magnet facility hasn’t been built yet. MP Materials’ heavy rare earth separation capacity is under development. The Thacker Pass lithium project in Nevada — the largest lithium deposit in the U.S. — had its Department of Energy loan restructured in October 2025 to include debt service deferrals, which tells you the economics remain fragile. The Pentagon’s price floor mechanism for rare earths is an admission that the market alone won’t sustain domestic production against Chinese competitors who operate at lower cost, lower environmental standards, and with direct state subsidy.

    There’s also a geographic diversification play that acknowledges the U.S. can’t do everything domestically. MP Materials announced a joint venture with the Pentagon and Saudi Arabia’s Ma’aden to build a rare earth refinery in Saudi Arabia — expanding non-Chinese separation capacity outside U.S. borders but within allied supply chains. The Export-Import Bank’s Supply Chain Resiliency Initiative finances upstream projects in allied countries where U.S. manufacturers have signed offtake agreements. The strategy is “friend-shoring” — building mineral processing capacity in countries that won’t weaponize it against the U.S. — because building it all domestically would take longer than the threat allows.

    The honest assessment

    The U.S. went from zero critical mineral strategy to $4.5 billion in deployed capital in roughly 18 months. That’s fast by government standards. It’s not fast by supply chain standards. China’s rare earth monopoly wasn’t built in 18 months, and it won’t be unwound in 18 months. The investments are necessary. They are not sufficient. And the fundamental constraint — that opening a mine in the U.S. takes longer than a presidential term — means the strategy requires continuity across administrations, which is the one thing American mineral policy has never had.

    The CHIPS Act’s evolution from semiconductor legislation to critical mineral funding vehicle is the clearest illustration of a lesson the copper shortage, the helium crisis, and the gallium export controls all teach independently: the energy transition, the AI buildout, and the defense industrial base all depend on the same materials, sourced from the same places, processed through the same chokepoints. We cover the full critical minerals landscape — from neodymium magnet manufacturing to China’s processing monopoly to the CHIPS Act response — across our Rare Earth Elements course, where the question isn’t whether the U.S. has the money to build a domestic supply chain but whether it has the time.

  • The United Front Work Department: How China Runs the World’s Largest Influence Operation

    In September 2024, a former aide to the governor of New York was arrested for allegedly acting as an unregistered agent of the Chinese government. The same month, a Chinese democracy activist living in New York was arrested and accused of spying for Beijing. A month earlier, a historian in the same city was convicted of being an agent for China’s intelligence services. Three separate cases, three separate individuals, one city, one operational playbook — and the organization coordinating the playbook has been running continuously since 1942, reports directly to the Chinese Communist Party’s Central Committee, and as of a February 2026 study by the Jamestown Foundation, operates through more than 2,000 linked organizations across the United States, Canada, the United Kingdom, and Germany alone. The organization is the United Front Work Department, and most people outside of intelligence and China-studies circles have never heard of it.

    What the United Front actually is

    The UFWD is one of six main departments of the Chinese Communist Party. It is not an intelligence agency in the way the CIA or MI6 are — it doesn’t run agents collecting classified information. It is something more structurally ambitious than that. The UFWD’s mission is to identify, cultivate, and manage relationships with every group and individual outside the CCP that could be useful to the Party’s interests — ethnic minorities, religious organizations, private entrepreneurs, overseas Chinese communities, foreign politicians, academics, business leaders, social media influencers, and the eight minor political parties legally permitted to exist inside China. Mao Zedong described the UFWD as one of the Party’s “three magic weapons” alongside the People’s Liberation Army and the Party itself. Xi Jinping repeated that description in 2017. He wasn’t being nostalgic.

    The best one-sentence summary came from Representative Mike Gallagher, former chair of the House Select Committee on the CCP: the United Front’s operational principle is “making idiots useful” — co-opting any individual or organization to advance the Party’s goals. The strategy operates through three main channels: silencing criticism of the regime globally, promoting Beijing’s preferred narratives abroad, and manipulating foreign institutions through clandestine and often illegal operations. Stanford University’s Internet Observatory and the Hoover Institution described the United Front as cultivating pro-Beijing perspectives by rewarding those it deems friendly with accolades and lucrative opportunities, while orchestrating social and economic pressure against critics — pressure that is “often intense but indirect, and clear attribution is therefore difficult.”

    The difficulty of attribution is the feature, not the bug. The UFWD operates through quasi-official organizations, civic groups, cultural associations, professional networks, and friendship societies that carry innocuous names — the Council for the Promotion of Peaceful National Reunification, the Chinese People’s Association for Friendship with Foreign Countries, the All-China Federation of Returned Overseas Chinese — and blur the line between state activity and private initiative. When a Chinese community organization in Manhattan turns out to be housing an undeclared police station operating on behalf of China’s Ministry of Public Security, the plausible deniability is structural. The organization looks like a community center. It functions as a transnational law enforcement outpost. Both of those things are simultaneously true.

    The machinery

    In 2018, Xi reorganized the UFWD to absorb the State Administration for Religious Affairs and the Overseas Chinese Affairs Office, making it the Party’s central agency for managing ethnic, religious, and diaspora affairs under one roof. The department’s director, Shi Taifeng, is a Politburo member — a level of seniority that signals the UFWD’s priority within the Party hierarchy. The UFWD oversees or coordinates with the Chinese People’s Political Consultative Conference, whose 2,000-plus members serve as the department’s primary interface with non-Party elites both domestically and abroad.

    The overseas infrastructure operates through several documented channels. Confucius Institutes — Chinese-language and cultural programs embedded in universities worldwide — were launched in 2004 by Liu Yandong, who was head of the UFWD at the time. The program was funded through the CCP Propaganda Department, formally affiliated with the UFWD, and overseen by personnel based in Chinese embassies and consulates. At peak, more than 500 Confucius Institutes operated in universities globally, with over 1,000 Confucius Classrooms in secondary schools. A former Politburo Standing Committee member responsible for propaganda wrote in 2010 that China should “actively carry out international propaganda battles” on core issues and “do well in establishing cultural centers and Confucius Institutes.” Over 100 have been shut down in the United States since 2019 after the FBI flagged them as potential propaganda and intelligence-gathering platforms. Some have reopened under new names.

    Chinese Students and Scholars Associations receive funding and direction from Chinese embassies and serve as monitoring and mobilization networks on foreign campuses. Multiple CSSAs have been documented suppressing academic freedom — organizing protests against speakers critical of Beijing, reporting on Chinese students’ “dissident activity” to embassy officials, and mobilizing nationalist demonstrations. The UFWD also works through overseas Chinese-language media, several of which are owned or controlled through China News Service, a UFWD-affiliated outlet.

    Elite capture

    The term “elite capture” describes the UFWD’s strategy for cultivating relationships with foreign decision-makers — corporate executives, university presidents, politicians, former intelligence officials — by offering access, business opportunities, paid trips to China, honorary positions, and investment partnerships. The strategy is patient and incremental. A university president accepts funding for a research center. A retired politician joins the board of a Chinese-linked foundation. A business executive receives preferential market access. None of these interactions are illegal in isolation. The aggregate effect is a network of relationships that constrains criticism of Beijing at the institutional level without any single participant necessarily understanding the full architecture they’re embedded in.

    Australia became the most publicly documented case study. In the mid-2010s, investigations revealed that businessmen with close ties to UFWD-linked organizations had made significant political donations to both major Australian parties, prompting a national reckoning and new foreign interference legislation — the first of its kind in a Western democracy. The Australian Strategic Policy Institute documented the UFWD’s operational structure in a landmark 2020 report, concluding that “there’s no clear distinction between domestic and overseas united front work: all bureaus of the UFWD and all areas of united front work involve overseas activities.” New Zealand faced similar revelations. Canada launched its own public inquiry. In October 2024, Swedish journalists identified 233 individuals across Europe connected to the United Front system, and the Jamestown Foundation identified 103 UFWD-linked groups in Sweden alone, spanning culture, business, politics, and media.

    The Taiwan dimension is the UFWD’s longest-running and most intensive operation. The department sponsors paid trips and summer camps to mainland China for Taiwanese youth to promote pro-unification sentiment. In August 2025, Taiwan’s Ministry of Education banned academic cooperation with three mainland universities — Jinan University, Huaqiao University, and Beijing Union University — specifically because of their documented UFWD affiliations and their role in recruiting Taiwanese students for influence activities.

    What it isn’t

    It’s important to distinguish the UFWD from a conspiracy theory about Chinese people. The UFWD targets the Chinese diaspora as much as it targets foreign institutions — monitoring overseas Chinese communities, suppressing dissent among Chinese nationals abroad, and co-opting community leaders to serve as intermediaries. The victims of UFWD operations include Chinese students who self-censor on foreign campuses because they know their classmates report to the embassy, Uyghur and Tibetan activists who face harassment from UFWD-linked civic organizations in their adopted countries, and Hong Kong democracy advocates who discover that community associations in their new cities are operated by the same apparatus they fled. The UFWD is a Party instrument aimed at everyone the Party considers potentially useful or potentially threatening, regardless of nationality — but with particular intensity directed at the Chinese diaspora itself.

    The Council on Foreign Relations described the UFWD as an “external intelligence organization” whose officials often operate under diplomatic cover. The British government’s assessment, published in 2024, concluded that the UFWD is not an intelligence organization in the traditional sense but provides cover for Ministry of State Security officers and serves as a node in a “whole of state” approach to information gathering where the boundaries between influence, intelligence, and legitimate diplomacy are deliberately erased. That deliberate erasure — the impossibility of determining where diplomacy ends and espionage begins — is the United Front’s structural advantage and the reason it has operated for 84 years without most of the world knowing its name.

    We cover the UFWD alongside BCCI’s regulatory arbitrage, the shell company architectures behind sanctions evasion, Crypto AG’s signals intelligence operation, and 20 other case studies of invisible institutional power across our Shadowcraft course — where the question isn’t whether covert influence networks exist, but how they’re built, how they’re funded, who they report to, and what the paperwork looks like when they’re finally exposed.

  • Gallium and Germanium: China’s Newest Export Control Weapons and Why Chips Need Them

    In July 2023, China’s Ministry of Commerce announced export controls on gallium and germanium—two metals most people have never heard of, both of which are essential to semiconductor manufacturing, fiber optics, infrared optics, solar cells, and military hardware. Exporters were required to apply for licenses, disclose end-use information, and identify the final destination of every shipment. The result was immediate: Chinese gallium exports dropped from 6,876 kilograms in July 2023 to 227 kilograms in October 2023. Germanium fell from 7,965 kilograms to 590 kilograms in the same period. European prices for both metals nearly doubled within a year. By May 2025, the Rotterdam price of gallium had hit $687 per kilogram—an increase of over 150 percent from pre-control levels. Meanwhile, gallium prices inside China fell, because domestic oversupply had nowhere to go. Beijing was sitting on cheap material it refused to sell, watching the rest of the world scramble.

    In December 2024, China escalated to an outright ban on gallium and germanium exports to the United States, along with antimony and superhard materials—a direct retaliation for the Biden administration adding 140 Chinese semiconductor companies to the Entity List. The ban was suspended in November 2025 as part of bilateral trade negotiations, with general licenses issued through November 2026. But the legal framework remains intact. The controls can be reactivated at any time. The message was delivered: China controls 98 percent of global gallium production and 60 percent of germanium, and it’s willing to use that leverage the same way OPEC uses oil—as a strategic instrument with a valve.

    What gallium and germanium actually do

    These aren’t rare earth elements—they’re critical minerals with their own supply chain vulnerabilities and their own reasons for mattering.

    Gallium’s primary semiconductor application is gallium nitride (GaN), a wide-bandgap material that handles higher voltages, operates at higher temperatures, and switches faster than silicon. GaN-based chips are more efficient and more durable than their silicon equivalents, which is why they’re displacing silicon in power electronics, fast chargers, 5G base stations, radar systems, and military communications hardware. Gallium arsenide (GaAs) is the backbone of radio-frequency chips in smartphones—the components that connect your phone to a cell tower use gallium, not silicon. Every 5G phone on earth contains gallium-based semiconductors. LED lighting runs on gallium compounds. The photovoltaic industry uses gallium in high-efficiency multijunction solar cells for spacecraft and concentrated solar installations.

    Germanium’s niche is narrower but equally non-substitutable. Its high electron mobility makes it essential for high-speed transistors. It’s the material of choice for infrared optical components—night vision goggles, thermal imaging cameras, missile guidance systems, satellite sensors. Fiber-optic cables use germanium-doped silica to minimize signal loss over long distances, which means the physical infrastructure of the internet—the glass cables that carry data between continents—depends on a material that one country dominates. An F-35 fighter jet’s infrared targeting system, the fiber-optic backbone connecting data centers, and the night vision goggles worn by infantry all share a supply chain vulnerability that runs through Beijing.

    How China got here

    Gallium doesn’t occur in nature as a primary ore. It’s a byproduct of aluminum smelting—extracted from bauxite processing residues at concentrations so low that recovery is only economical if you’re already running an aluminum smelter at scale. China produces more aluminum than any other country on earth, which means it generates more gallium-bearing waste streams, which means it dominates gallium production not because it set out to corner the market but because it cornered the upstream industry that gallium falls out of. The same pattern: whoever processes the most bauxite gets the most gallium, and China processes the most bauxite.

    Germanium is slightly more distributed—China controls 60 percent rather than 98 percent—but the refining infrastructure is similarly concentrated. Global annual demand for gallium is below 700 metric tons, a fraction of markets like copper (25.9 million tons) or nickel (3.1 million tons). The small market size is itself a strategic advantage for Beijing: it’s easier to manipulate a 700-ton market than a 25-million-ton market. Small disruptions in supply produce large price swings, which gives China leverage that’s disproportionate to the tonnage involved.

    The controls weren’t random. They were calibrated responses to specific American actions. The August 2023 licensing requirement answered the initial rounds of U.S. chip export controls. The December 2024 ban answered the Entity List expansion. The November 2025 suspension was part of a broader negotiated pause. Each escalation was timed, proportional, and reversible—designed to demonstrate capability without triggering a full decoupling. China has been explicit that the controls are not permanent policy. They’re a deterrent. The message: if you restrict our access to advanced chips and lithography equipment, we restrict your access to the materials those chips are made from.

    The rerouting problem

    The ban is leakier than it looks. Stimson Center analysis of Chinese customs data found that in 2024, the quantity of germanium exported to the United States fell by approximately 5,900 kilograms—almost exactly the amount by which germanium exports to Belgium increased (6,150 kilograms). The combined total to both countries was essentially flat across 2023 and 2024. The material appears to be flowing through third-country intermediaries that reimport it to the United States without Chinese end-use restrictions applying.

    For gallium, the picture is more complicated because Canada and Germany have secondary gallium production from their own aluminum smelting operations, making it harder to distinguish genuine non-Chinese supply from rerouted Chinese material. The U.S. Census Bureau records imports by the country that produced the material unless it underwent “substantial transformation” in a third country—a classification that creates ambiguity about whether Belgian-processed germanium originally sourced from China counts as Belgian germanium.

    The rerouting doesn’t eliminate the vulnerability. It adds cost, uncertainty, and transit time. It creates a supply chain that depends on Beijing’s tolerance of the workaround, which can be withdrawn. And it doesn’t address the fundamental concentration: if China decided to enforce end-use controls across all destinations—not just the United States—the third-country channels would close.

    What the West is building

    The response has been faster than for rare earths but still measured in years rather than months.

    MTM Critical Metals is building a facility in Texas to extract gallium from industrial scrap, scheduled to begin operations in early 2026—an unusually fast timeline for critical mineral projects. The company is reportedly negotiating binding agreements with Indium Corporation that include minimum price floors designed specifically to protect against Chinese market manipulation. Canada’s 5N Plus and Germany’s PPM Pure Metals have secondary production from domestic aluminum operations. Japan has invested in recycling infrastructure to reduce import dependence.

    The EU’s Critical Raw Materials Act targets reducing dependency on single-source suppliers. The CHIPS Act allocated funding for domestic semiconductor material infrastructure. But the structural problem is the same one that affects rare earth diversification: building new supply takes years, the markets are small enough that Chinese pricing can undercut new entrants at will, and the byproduct economics mean you can’t produce gallium at scale without producing aluminum at scale, which means diversifying gallium supply requires diversifying an entire upstream industry.

    Gallium prices inside China are lower than international prices because the domestic surplus can’t be exported. If China eventually lifts all controls, the price crash could make every Western diversification project uneconomic overnight—the same dynamic that has killed rare earth mining ventures outside China for two decades. Beijing doesn’t need to maintain the export ban permanently. It just needs the threat of reimposing it, combined with the ability to flood the market with cheap material if Western alternatives get too close to viability. The weapon isn’t the embargo. It’s the optionality.

    What it tells you about the next decade

    Gallium and germanium are test cases for a broader pattern. China identified that its dominance of bauxite processing gave it accidental control of a small but critical material, weaponized that control in response to American technology restrictions, calibrated the escalation to demonstrate capability without provoking full decoupling, and then suspended the controls as a negotiating chip—while keeping the legal framework active for reimposition. Every element in the critical minerals portfolio—antimony, graphite, rare earth processing technology, medium and heavy rare earths—has been subject to the same playbook in sequence since 2023.

    The progression: rare earth processing dominance (established over decades) → gallium and germanium controls (2023) → antimony controls (2024) → rare earth processing equipment and technology controls (October 2025, suspended November 2025). Each step expands the scope. Each suspension is temporary and conditional. The architecture for comprehensive export controls across the entire critical minerals supply chain is built. It’s just not fully activated—yet.

    We cover gallium and germanium alongside the helium shortage, rare earth recycling, and the full landscape of critical materials that underpin modern technology across our Rare Earth Elements course—including why the most strategically important metals in the semiconductor supply chain are ones most people can’t name, produced as byproducts of industries most people don’t think about, and controlled by a country that knows exactly what it has.

  • Water as a Strategic Resource: Which Countries Control the Rivers & Infrastructure Other Countries Need

    On March 7, 2026, Iran’s foreign minister accused the United States of attacking a freshwater desalination plant on Qeshm Island in the Strait of Hormuz, disrupting water supply to 30 villages. The next day, Bahrain reported that an Iranian drone had damaged one of its 103 desalination plants. Iran’s parliament speaker then warned that if the coalition occupies an Iranian island with regional support, “all the vital infrastructure of that regional country will, without restriction, become the target of relentless attacks.” The vital infrastructure he meant was water. More than 400 desalination plants line the shores of the Arabian Gulf. They produce over 40 percent of the world’s desalinated water. Qatar gets 99 percent of its drinking water from desalination. Kuwait and Bahrain get over 90 percent. Without these plants, roughly 100 million people in the Gulf region would have no regular access to potable water. The petrostates are, as one scholar framed it, saltwater kingdoms—societies whose survival depends on converting seawater into drinking water at industrial scale, powered by the same fossil fuels that made them wealthy. The Iran war has turned that dependency from an engineering fact into a military vulnerability.

    This is the version of water conflict that the 21st century actually produces: not armies fighting over a riverbank, but missiles aimed at the machines that make seawater drinkable.

    The rivers that run through other people’s countries

    Two hundred and sixty international river basins account for approximately 60 percent of the world’s freshwater. They cover nearly half of the earth’s surface and serve 40 percent of the global population. No formal agreement guarantees equal shares in 60 percent of those basins. The geopolitics of water is determined by a single structural fact: rivers flow downhill, which means the country upstream controls the water that the country downstream needs to survive.

    Ethiopia’s Grand Ethiopian Renaissance Dam on the Blue Nile is the most consequential current example. Egypt depends on the Nile for 97 percent of its freshwater—a dependency so total that any upstream dam represents, from Cairo’s perspective, an existential threat. Ethiopia began filling the GERD’s reservoir in 2020. Egypt has framed the issue as a matter of national security. The Arab League’s May 2025 Baghdad Declaration elevated “Arab water security” to a shared strategic imperative, explicitly championing Egypt’s position—despite the headwaters of the Nile originating in non-Arab Ethiopia. Diplomatic negotiations have stalled repeatedly. The dispute has been ongoing for over a decade, with no binding resolution, and Ethiopia’s position—that it has sovereign rights to develop hydropower on a river within its borders—is as legally defensible as Egypt’s claim that historical usage entitles it to the Nile’s flow.

    Turkey’s Southeastern Anatolia Project on the Tigris and Euphrates is the second flashpoint. Turkey’s dam-building programs have reduced Iraq’s water supply along both rivers by 80 percent since 1975. The Ilisu Dam on the Tigris generates less than half its potential energy output—climate-driven precipitation drops in the watershed caused reservoir levels to fall below operational thresholds in 2022—but it functions as a geopolitical lever regardless. Turkey uses water infrastructure to extract economic and political concessions from Iraq, a dynamic that will intensify as climate change reduces precipitation across the basin.

    China’s cascade of dams on the upper Mekong—known in China as the Lancang—gives Beijing disproportionate control over water flows that Cambodia, Vietnam, Laos, and Thailand depend on for agriculture, fisheries, and hydropower. The Mekong River Commission exists as a platform for dialogue, but China is not a member. On the Brahmaputra, Chinese diversion projects raise fears in India and Bangladesh. The Tibetan Plateau—sometimes called “Asia’s water tower”—is the source of rivers that sustain billions of people across South and Southeast Asia, and the glaciers feeding those rivers are melting at rates that will fundamentally alter flow patterns within decades.

    The Indus Waters Treaty between India and Pakistan, signed in 1960, has survived multiple wars—but India reportedly placed it in abeyance in May 2025, and the Ganges Treaty with Bangladesh expires in 2026. Both instruments were designed for hydrological conditions that climate change is rendering obsolete. Fixed allocation quotas don’t work when the total volume of water in the system is declining.

    The desalination solution and its limits

    Desalination is the technology that allows countries without rivers to exist at modern scale. Saudi Arabia has invested at least $53.4 billion in desalination infrastructure since 2006 and plans to invest roughly $80 billion more. Eight of the ten largest desalination plants in the world are on the Arabian Peninsula. The Ras al-Khair plant in Saudi Arabia produces roughly 264 million gallons per day. These facilities are engineering marvels that convert seawater into potable water through reverse osmosis or thermal distillation, enabling cities like Dubai, Doha, and Kuwait City to support populations that the natural water supply couldn’t sustain at any scale.

    The limitation is that desalination plants are stationary, energy-intensive, and targetable. More than 90 percent of the Gulf’s desalinated water comes from just 56 plants. During Iraq’s 1990 invasion of Kuwait, Saddam Hussein’s forces released hundreds of millions of barrels of oil into the Persian Gulf, contaminating the seawater that desalination plants depend on. Kuwait had to import water by tanker. In the current conflict, Iranian strikes on March 2 hit Dubai’s Jebel Ali port roughly 12 miles from a complex with 43 desalination units. Debris from intercepted missiles reportedly damaged facilities in Kuwait and the UAE. The Hudson Institute’s assessment is blunt: unlike disruptions to oil markets, which primarily trigger economic consequences, striking desalination facilities “directly threatens daily survival.”

    The Gulf states have built contingency infrastructure—pipeline networks, storage reservoirs, protective barriers for intake valves. The UAE maintains 45 days of water storage under its 2036 water security strategy. Saudi Arabia has geographic depth and Red Sea facilities that provide resilience. But Qatar, Bahrain, and Kuwait have minimal strategic reserves and near-total dependence on Gulf-shore plants within range of Iranian missiles. If Iran were to systematically target desalination infrastructure—which it has threatened but not yet executed—millions of people would face acute water crisis within weeks.

    Desalination as a moonshot technology

    The vulnerability exposed by the Iran war is also a technology problem with a technology roadmap. Current desalination is expensive—roughly $0.50 to $1.50 per cubic meter depending on the technology and energy source—and energy-intensive enough that the plants themselves are tethered to fossil fuel infrastructure, creating a circular dependency: oil powers the machines that make water that supports the populations that produce the oil.

    Next-generation desalination aims to break that loop. Solar-powered reverse osmosis plants, already operational in small deployments in the Middle East and North Africa, decouple water production from fossil fuels. Forward osmosis, membrane distillation, and capacitive deionization offer potential efficiency improvements over conventional reverse osmosis. The broader moonshot vision—desalination powered entirely by renewable energy, at costs low enough for agricultural irrigation rather than just municipal drinking water, deployable at scales that could make arid regions self-sufficient in freshwater—would fundamentally alter the geopolitics of water by removing the scarcity that drives conflict. Studies project a potential 40 percent global shortfall in freshwater resources by 2030 while demand increases by more than 20 percent. Desalination at scale isn’t optional for the species. It’s the engineering requirement for sustaining 10 billion people on a planet where freshwater distribution doesn’t match population distribution.

    What the map actually shows

    The geopolitical map of water in 2026 has three layers. The first is the ancient layer: rivers that cross borders, with upstream countries holding structural power over downstream countries—Ethiopia over Egypt, Turkey over Iraq, China over Southeast Asia, India over Pakistan and Bangladesh. These conflicts predate the modern era and will outlast it.

    The second is the industrial layer: desalination plants that allow countries without rivers to function as modern states, concentrated in the Gulf and now exposed as military targets in a way that their designers never intended and their populations are only now confronting. A technology that was supposed to solve water scarcity has created a new vulnerability—centralized, targetable, dependent on energy infrastructure that is itself a target.

    The third is the technology layer: the moonshot question of whether desalination can become cheap, renewable, distributed, and resilient enough to decouple water supply from both geography and geopolitics. That’s a decades-long engineering problem, not a policy fix, and it belongs in the same category as fusion energy and space-based solar power—transformative if achieved, speculative on timeline.

    The common thread across all three layers is the same insight: water is not a commodity. It’s a strategic resource whose control determines which populations survive, which economies function, and which governments maintain legitimacy. Oil made the Gulf rich. Water keeps it alive. The Iran war is making that distinction impossible to ignore.

    We cover water geopolitics alongside the Darién Gap, forbidden zones, and the hidden geography that shapes the modern world across our Off The Map course. We also cover next-generation desalination as a civilization-scale engineering challenge across our Moonshot 2169 course—including why the most important technology for the next century might not be AI or fusion. It might be a cheaper way to remove salt from seawater.

  • The Semiconductor Supply Chain in 2026: Why Chips Are Still a Geopolitical Weapon

    The global semiconductor industry is expected to hit $975 billion in revenue in 2026—a 26 percent increase over 2025, which itself grew 22 percent. The combined market capitalization of the top 10 chip companies reached $9.5 trillion by December 2025, up 181 percent from two years earlier. TSMC introduced the world’s most advanced 2-nanometer chip, promising 10 to 15 percent faster speeds and 20 to 30 percent lower power consumption than its 3-nanometer predecessor. And the United States and China are engaged in a technology control regime that a Texas National Security Review analysis compared, unfavorably, to Cold War-era CoCom—the multilateral export control system that tried and largely failed to prevent the Soviet Union from accessing Western technology.

    The semiconductor supply chain was the most globally integrated industrial system ever built. It is now fragmenting along geopolitical lines, and every major government on earth is treating chip access as a national security priority rather than a commercial one.

    The chokepoints

    The semiconductor supply chain has a concentration problem that makes OPEC look diversified. Three American companies—Nvidia, Qualcomm, and Broadcom—account for over 75 percent of advanced chip design. TSMC in Taiwan manufactures 80 to 90 percent of the world’s sub-7-nanometer chips. Two Korean companies, Samsung and SK Hynix, plus one American company, Micron, produce essentially all the world’s high-bandwidth memory. ASML, a single Dutch company, manufactures the extreme ultraviolet lithography machines that are required to produce chips below 7 nanometers—and ASML is the only company on earth that makes them.

    Each of these chokepoints is a potential geopolitical weapon, and several have already been deployed as one. The U.S. began restricting semiconductor exports to China in October 2022, targeting advanced AI chips and the equipment used to manufacture them. Those controls were tightened in October 2023, again in December 2024, and again in March 2025, when the Trump administration blacklisted dozens of additional Chinese entities. The Biden administration’s January 2025 AI Diffusion Rule proposed a three-tiered global framework that categorized every country on earth by its access to advanced chips—essentially creating a semiconductor caste system aligned with U.S. strategic interests. The Trump administration rescinded parts of that rule but imposed its own restrictions. The Netherlands, under sustained U.S. pressure, restricted ASML’s sales of advanced lithography equipment to China. Japan implemented similar controls on semiconductor manufacturing equipment.

    China responded with its own export controls on critical minerals—gallium, germanium, and other materials essential to chip manufacturing—explicitly leveraging its dominance of the mineral supply chain as a countermeasure. The tit-for-tat is ongoing, escalating, and structurally embedded in both countries’ industrial strategies.

    What the controls actually accomplished

    The honest assessment, three years into the U.S. export control regime, is that the controls disrupted China’s semiconductor industry without stopping it. CSIS analysis found that the restrictions created equipment shortages for Chinese chipmakers, produced severe bottlenecks, limited manufacturing yields, and forced workforce reductions across China’s chip sector. Chinese manufacturing yields for advanced chips reportedly run 30 to 50 percent, compared to over 90 percent for U.S.-allied manufacturers. Huawei’s Ascend 910C AI processor, China’s most advanced domestically produced AI chip, is limited to an estimated 250,000 to 300,000 units in 2026 production, bottlenecked primarily by high-bandwidth memory availability. For comparison, U.S. production of Nvidia B300-equivalent chips reached 3.67 million units in 2025—and each B300 is roughly five times more powerful than a 910C.

    But China adapted faster than the controls’ architects expected. Cut off from ASML’s state-of-the-art EUV lithography machines, China’s Semiconductor Manufacturing International Corporation (SMIC) used older deep ultraviolet machines to produce 7-nanometer and even 5-nanometer chips—behind TSMC’s leading edge of 3 nanometers, but far more advanced than the controls were designed to allow. Huawei reportedly used shell companies to trick TSMC into manufacturing 2 million chiplets for its Ascend 910 processors. China is investing in domestic lithography equipment, recruiting former ASML employees by the thousands, and pursuing alternative chip architectures—including a 2D transistor from Peking University researchers that reportedly operates 40 percent faster than TSMC’s 3-nanometer devices while consuming 10 percent less energy.

    The CSIS report summarized the fundamental problem: chipmaking equipment is heavy, produced in small lots, and hard to smuggle. Chips are tiny, produced by the millions, and easily concealed. Design software can be moved across borders undetected. Export controls can restrict equipment. They struggle to restrict everything else. The Texas National Security Review analysis drew the Cold War parallel explicitly: CoCom did not prevent the Soviet Union from accessing key technologies, and China is a “more adept target” than the USSR was.

    The cost of the controls to the U.S.

    The restriction regime isn’t free for the restrictor. An ITIF economic model estimated that full U.S.-China semiconductor decoupling would cost American chipmakers approximately $77 billion in first-year revenue losses. U.S. semiconductor R&D investment could decrease by 24 percent, or $14 billion. Over 80,000 American semiconductor jobs would be at risk. Korean firms would gain roughly $21 billion of that lost U.S. business; EU firms would pick up $15 billion; Taiwanese firms $14 billion; Japanese firms $12 billion.

    Nvidia has already raised prices on nearly all its AI GPUs—gaming cards up 5 to 10 percent, high-end AI accelerators up 15 percent—citing increased manufacturing costs and tariff impacts. TSMC is considering a 10 percent price increase on advanced wafers. The semiconductor industry was built as a globally interdependent system where each region specialized in what it did best. Breaking that interdependence doesn’t just hurt the target. It raises costs for everyone, reduces R&D reinvestment for the companies leading innovation, and creates market share opportunities for competitors in countries that aren’t implementing controls with the same rigor.

    The geopolitical imperative and the economic imperative are pulling in opposite directions, and no government has figured out how to resolve the tension. Restrict too aggressively and you damage your own industry. Restrict too loosely and you fund your adversary’s military modernization. The U.S. government approved Nvidia to sell H200 AI chips to selected customers in China in December 2025—the same government that had blacklisted dozens of Chinese entities months earlier. The policy is simultaneously hawkish and permissive because the constraints are genuinely contradictory.

    The Taiwan variable

    Underlying all of this is a single geographic fact: the island of Taiwan, 180 kilometers off the Chinese coast, with a population of 24 million, manufactures the overwhelming majority of the world’s most advanced semiconductors. TSMC’s fabrication facilities in Taiwan represent a concentration of strategic capability that has no parallel in any other industry. If those facilities were destroyed, captured, or rendered inoperable by a Chinese military action—or by the threat of one—the global technology supply chain would experience a disruption that would make the COVID-era chip shortage look trivial.

    This is why the U.S. is funding TSMC’s construction of fabrication plants in Arizona under the CHIPS Act. It’s why Japan, the EU, and South Korea are all building or expanding domestic chip manufacturing. The entire reshoring effort is an insurance policy against a Taiwan contingency—and it’s going to take a decade to meaningfully reduce the concentration risk, because building a leading-edge fabrication facility takes three to five years and costs $15 to $20 billion per facility.

    The semiconductor supply chain in 2026 is not a market. It’s a battlefield where the weapons are export controls, lithography machines, rare earth minerals, fabrication capacity, and the strategic ambiguity surrounding a 180-kilometer strait. The $975 billion flowing through it annually isn’t just commerce. It’s the material substrate of AI development, military capability, and economic power for every country on earth—and the fight over who controls it is the defining industrial conflict of the decade.

    We cover the semiconductor supply chain alongside rare earth monopolies, conflict minerals, and the full landscape of critical material geopolitics across our Rare Earth Elements course—including why the most important factory on earth is on an island that one country claims as its own and another has promised to take.